Sharps Compliance (SMED) Misses Q3 EPS by 6c, Revenues Miss

Sharps Compliance (NASDAQ: SMED) reported Q3 EPS of ($0.10), $0.06 worse than the analyst estimate of ($0.04). Revenue for the quarter came in at $10.4 million versus the consensus estimate of $10.64 million.

• Third quarter 2020 revenue of $10.4 million, an increase of 10% over prior year
• Unused medications billings grew 24%
• Route-based billings increased 16%
• Billings increased in several key markets including Retail at 46%, Professional at 6% and Assisted Living at 20%
• Increasing medical waste processing capacity from 10 million to 27 million pounds per year by September 2020
• Preparing for strong flu and potential COVID-19 immunization seasons through a significant increase in inventory of medical waste mailbacks and additional distribution facility space
• Route-based business footprint extends to 32 states, or 70% of the population, significantly increasing the Company’s pipeline of larger small and medium quantity generator new prospect opportunities

David P. Tusa, President and Chief Executive Officer of Sharps, stated, “As we report our third quarter results, our country and the entire world are coping with the devastating health and economic impacts of COVID-19. At Sharps Compliance, we’re taking every precaution to ensure the safety of our employees, while at the same time remaining active as a leading national provider of comprehensive medical waste solutions, bringing uninterrupted essential support to our customers and the healthcare industry. In support of this, we increased our route-based drivers, plant and operations personnel by ten percent (10%) in advance of the COVID-19 pandemic to make sure that our operations and servicing of customers would not be adversely affected by the potential absence of employees due to COVID-19. We also temporarily increased the pay for our front-line operations personnel and drivers during the pandemic.”

Tusa added, "Regarding the quarter, March is typically our slowest revenue quarter as a result of seasonality and customer ordering patterns. In spite of this, we achieved growth in revenue with increased customer billings in our retail, professional, and assisted living markets and substantial growth in two of our three key solutions - unused medication management and route-based, with our traditional mailback offering essentially flat for the quarter. We expected higher gross margins for the March 2020 quarter, but the cost of goods sold for the quarter was adversely impacted by the proactive 10% increase in route-based drivers, plant and operations personnel and by the pay increase for frontline workers we implemented to ensure uninterrupted service during the COVID-19 pandemic, as mentioned above. Additionally, we incurred operations costs related to the expansion of the route-based business into the Midwest ahead of the anticipated revenue. All of these efforts increased cost of goods sold for the quarter by about $200,000, or about 200 basis points."

For earnings history and earnings-related data on Sharps Compliance (SMED) click here.

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